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Irish financial regulation has been under the spotlight this week with the Financial Services Consultative Consumer Panel, which was appointed by the Minister for Finance, saying in a report that most consumers have lost “significant amounts of money,” due to the inadequacies of the financial regulatory structure. It also criticised the “deficient” response of the regulator to threats to consumers, including the domestic property bubble. Today, the media is slammed for stoking up hysteria about an alleged lack of financial regulation in Ireland. In reality, it is claimed Ireland is heavily regulated and the "financial press" is said to have made its own contribution "to the debacle which now engulfs us."

In the past week, Taoiseach Brian Cowen has referred to the "bad news brigade" on a number of occasions and his predecessor Bertie Ahern, was part of the vested interest brigade, which dismissed criticism of economic policy during the bubble, as treasonous. The post hoc rationalisation now is that the economic calamity could not have been foreseen. The severity of the recession yes but not the direction in which the economy was heading. “The reliance on the construction sector, which had grown to 12% of GDP, was something we were in fact going to move down, over time, to get a soft landing – which isn’t available to us now because of the financial crisis that has hit us,” Cowen said last week, when launching his party’s local election manifesto. The facts were that DKM Economic Consultants' 2007 estimate was that Irish construction output represented 22.6% of GNP and 19% of GDP, when measured in gross output terms. The construction to GDP ratio was the second highest proportion (after Spain) in the European Union and ranged from less than 8% in Sweden to over 21% in Spain and with an average ratio of around 12% in Western Europe and less than 11% in the UK.

Yes of course, criticise the media but extreme caution is required now in respect to the vested commercial interest critics, who kept their own counsel, during a period of monumental economic mismanagement.

David Dillon, a senior partner at Dillon Eustace solicitors, writes in the Irish Times today: "In times of stress, objective discourse is often in short supply. This is certainly the case when considering the reaction to the problems now being faced in the banking and financial services industry.

Public indignation has manifested itself in what can only be described as an assault by the media in Ireland, and to a certain extent internationally, on the Irish financial services industry and the state of regulation which applies to it.

Since the crisis began the press has indiscriminately denounced the financial sector.

The articles have been to a great extent characterised by prejudice and almost a sense of glee at the declaration of “open season” on a sector against which increasing resentment has been building for some time.

There was and is, predictably, no distinction made between any aspect or sector of the financial industry. The entire industry is systematically associated with every transgression."

Dillon feels aggrieved that the entire financial services industry is tarred with the one brush but his own approach is to take a bucket of tar and dump it on the whole media sector.

The only specific example he cites is a front cover of the mid-March edition of Business and Finance magazine.

There is no distinction made between financial reporting/analyses in the business sections of newspapers and opinion articles by individuals such as himself.

Given the extent of the crash; the collateral damage on the lives of tens of thousands of people and prospect of the Irish banking sector being in intensive care for a decade or more, should anyone be surprised that there has been an avalanche of comment on the misfortune - - some inevitably over the top?

David Dillon says: "In defence of the domestic industry including banking, Ireland diligently implements all EU directives and, therefore, the regulatory framework in Ireland is at least as good as elsewhere in the EU."

Maybe the framework but not the application.

Dillon also says: "Granted, in relation to the lending policies of the major banks, the Financial Regulator fell into exactly the same trap as all the major western regulators and in the euphoria of buoyant markets failed to spot the weaknesses of the models adopted by those banks."

Warren Buffett offered a warning to his leadership team at Berkshire Hathaway in 2006 when he wrote: "The five most dangerous words in business may be `Everybody else is doing it.'"

In the case of regulation and property booms, everybody else weren't going with the flow.

In an article last week, we wrote in relation to another Eurozone country: "It's not an accident that Spanish banks are not in intensive care like their Irish counterparts, despite similar property booms."

Dillon says: "If you look at the developments on tax havens as reported in the Financial Times over the last few weeks, where there is an objective analysis of tax havens, Ireland is nowhere mentioned because it embraces the highest standards."

Dillon continued: "Without any serious analysis, the media has come to the wrong consensus that Ireland is under-regulated and operates on a similar basis to the so-called tax havens. Anybody with any knowledge of global regulation knows this to be completely untrue."

Completely untrue?

While Ireland should not be put in the same classification as say Bermuda and the Cayman Islands, which are essentially maildrop locations, there is however evidence that we provide some tax haven-like facilities to foreign firms. Is it the duty of the media to stay silent or argue against the facts?

Two of the biggest Irish companies by revenue, are owned by Microsoft and operate from the offices of a Dublin law firm:

The Bureau of Economic Analysis (BEA), an agency of the US Department of Commerce, said in a November 2007 analysis of 2005 data, that value added of foreign affiliates representing these firms’ contribution to a host country’s GDP, accounted for 7.0% or more of the GDP in three countries; in Ireland (18.5%), Singapore (15.0%), and Canada (9.5%).

The BEA said the large affiliate share for Ireland may be related to US MNCs’ geographic allocation of their income from intellectual property rights (such as patents). A sizable share of the investment in Ireland is in industries, such as pharmaceuticals and software engineering, where intellectual property plays a major role. Affiliates in Ireland conduct substantial R&D work, "but it appears that a significant portion of the intellectual property held by these affiliates originated as a result of parent-company activity in the United States, and the property rights were subsequently relocated to Ireland where the tax regime for patent royalties is favorable. The royalty income, much of which is for use of the patents in other countries, is treated as arising from sales of services and is counted as part of the value added of the affiliates that hold them."

The BEA said that although this treatment is in accordance with accepted guidelines for both financial and economic accounting, some have questioned whether the shifting of rights to intangible assets between the domestic and foreign units of multinational firms, without a commensurate shift in productive activity, should result in changes in the attribution of production by country.

Dillon says the Sarbanes Oxley reforms as a regulatory piece of legislation were another reactionary act "which arguably achieved very little." Most abuses will be caught by proper application of existing rules, he wrote.

"Proper application," depends on the attitude to regulation and the willingness of politicians to stand up to the most powerful of vested interests.

Sarbanes Oxley was important in requiring a CEO to specifically acknowledge responsibility for defined issues in a company.

As for the IFSC and regulation, negative international attention in recent years hasn't originated with the Irish media.

The Financial Times in 2006 reported: "Reinsurance giant General Re moved a massive $500 million fraud to Dublin because Ireland has lax financial reporting and was a country 'without too much regulatory oversight,' US prosecutors have said in court papers lodged in Virginia.

They also allege that General Re's former chief financial officer, Elizabeth Monrad, said that such illegal transactions were 'like morphine' because they become so financially addictive, while the head of its Dublin subsidiary, Cologne Re Dublin, assured his bosses that there was no way the transaction would show up on public documents in Dublin."

In more recent times, prudent Germans were understandably aghast at news that some of its publicly-owned banks such as SachsenLB, which had a unit based in the IFSC, that bought debts under names like Georges Quay and Ormond Quay and managed to build up a €30 billion operation and this was all done off the main bank's books. It was reported that the deals were so complicated they couldn't even be run through the bank's own risk assessment software.

David Dillon concluded his article: "Remember it is difficult to find anybody who does not have an agenda and when it comes to financial markets, protectionism, however disguised, is always lurking in the background."